Correlation Between Broadridge Financial and First Advantage

Can any of the company-specific risk be diversified away by investing in both Broadridge Financial and First Advantage at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Broadridge Financial and First Advantage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Broadridge Financial Solutions and First Advantage Corp, you can compare the effects of market volatilities on Broadridge Financial and First Advantage and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Broadridge Financial with a short position of First Advantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadridge Financial and First Advantage.

Diversification Opportunities for Broadridge Financial and First Advantage

-0.09

Correlation Coefficient

Broadridge Financial  First Advantage

Good diversification

The 3 months correlation between Broadridge and First is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Broadridge Financial Solutions and First Advantage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Advantage Corp and Broadridge Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Broadridge Financial Solutions are associated (or correlated) with First Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Advantage Corp has no effect on the direction of Broadridge Financial i.e., Broadridge Financial and First Advantage go up and down completely randomly.

Pair Corralation between Broadridge Financial and First Advantage

Allowing for the 90-day total investment horizon Broadridge Financial Solutions is expected to generate 0.52 times more return on investment than First Advantage. However, Broadridge Financial Solutions is 1.93 times less risky than First Advantage. It trades about 0.16 of its potential returns per unit of risk. First Advantage Corp is currently generating about 0.04 per unit of risk. If you would invest  20,997  in Broadridge Financial Solutions on September 5, 2024 and sell it today you would earn a total of  2,225  from holding Broadridge Financial Solutions or generate 10.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Broadridge Financial Solutions  vs.  First Advantage Corp

Broadridge Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Broadridge Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Advantage Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Advantage Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Advantage is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Broadridge Financial and First Advantage

The main advantage of trading using opposite Broadridge Financial and First Advantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadridge Financial position performs unexpectedly, First Advantage can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Advantage will offset losses from the drop in First Advantage's long position.

The idea behind Broadridge Financial Solutions and First Advantage Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.